There are a few very important themes that we should all keep in our heads when we’re debating changes to America’s system of health care provision.
First, the economic pressure from health care spending is not a government problem, it’s a systemic problem. If anything, spending is growing faster in the private than the public sector. Here’s a graph I posted a while ago that is highly germane to this post too, as you’ll see in a moment.
Second, and this is most important in today’s climate of cut, cut, cut: cost shifting is not cost saving.
When Rep Ryan argued he could save Medicare by providing a voucher that was worth a lot less than the cost of comparable coverage, he was shifting, not saving, on costs. And that’s also what we would be doing if we increased the eligibility age of Medicare from 65 to 67, an option that may well be put before the Congressional super-committee tasked with more deficit reduction.
My CBPP colleague Paul Van de Water has a new paper out today on this proposal and the analysis features a graph that usefully combines both of the above points.
Medicare is actually a less expensive way to provide coverage to older persons relative to the alternatives. As Paul notes:
“People who lost Medicare would have to seek health coverage from other sources. This would affect not only their own personal budgets but also employers’ costs, state budgets, and the premiums paid by Medicare beneficiaries and participants in the new health insurance exchanges.”
As the figure shows, the increase in these other sources of health care would be a lot more expensive than the savings. Here’s a case where the outcome is worse than principle #2 above: not only do cost shifting not generate cost savings. It generates higher costs.
Other key findings from Paul’s study:
65- and 66-year-olds losing Medicare coverage would face higher out-of-pocket health care costs, on average. Two-thirds of this group — 3.3 million people — would face an average of $2,200 more each year in premiums and cost-sharing charges.
Employers that provide health coverage to their retirees would face higher costs as more 65- and 66-year-olds received primary coverage through their employer rather than Medicare. Medicare beneficiaries, as well as people under age 65 who buy insurance through the new health insurance exchanges, would face higher premiums as 65- and 66-year-olds left Medicare and many of them bought coverage through the exchanges.
State Medicaid costs would rise as some of the people who lost Medicare coverage would shift to Medicaid.
So here’s the follow-up study I’d really like to see: how much would we save, system-wide (i.e., private and public combined), if instead of this bad idea of raising Medicare’s eligibility age by two years, we lowered it by two years.
I realize this violates principle #2—my hypothesis in this case is that lowering the Medicare eligibility age would generate savings in that gov’t spending would rise but that increase would be more than offset by the decline in private spending. But it’s an exception I’m happy to make.
C’mon—there must be some wonk out there with some time on her hands. And, assuming sound methodology, I will feature your work in an OTE post, even if I’m wrong!